Take a look at the 1-year chart of Trinseo (NYSE: TSE) with the added notations:

TSE has formed a relatively clear down-channel chart pattern over the last 3 months. A channel is simply formed through the combination of a trend line support that runs parallel to a trend line resistance. When it comes to channels, remember that any (3) points can start the channel, but a 4th point or more confirms it. You can see that TSE has several points of channel resistance (red) and support (green).

The Tale of the Tape: TSE has formed a common pattern known as a channel, in this case a down channel. A long trade could be entered on a pullback down to the channel support, or on a break through the channel resistance, which is currently sitting near $65. Short opportunities would be on rallies up to channel resistance or on a break of channel support.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Past Articles

Acuity Brands, Inc. provides lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications in North America and internationally.

Christian Tharp, CMT

Want to know which trades to make, how to manage your stops and when to exit your trades? As a CMT with over a decade worth of experience in trading & mentoring traders, I'd like to offer you the opportunity to let me help you overcome all of your obstacles.